The Financial Services Authority (FSA) has called on firms and individuals to tell them about bad behaviour within the marketplace to strengthen the regulator.
Speaking at a Marketforce conference on the future of life and long-term savings, Clive Adamson, the director of supervision within the conduct business unit, explained how the problems were sometimes slow in being brought to the attention of the FSA.
He said: "The FSA hasn't received a lot of intelligence from the market about what's going on. We know from experience when bad things happen that firms then tell us: 'We knew all about that two years ago'."
When asked why they had not informed the regulation, he said firms admitted they do not trust the FSA.
Adamson went on to explain how the new regulator wanted to change the dynamics to improve intelligence.
"We want to try and engender a greater degree of trust between the regulator and the industry so that they are more prepared to tell us when they see pockets of bad behaviour."
In his speech, Adamson also set out some of the key aspects of the new regulatory system, which will see the Financial Conduct Authority becoming the main oversight body for most firms.
He said: "Increasingly we will be looking at and challenging whether firms' business models really do give good outcomes for consumers.
"Very importantly we will be exercising out judgement. on occasions where we disagree with management, we will have the confidence to impose our judgement over management in terms of business model and strategy."
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